RBI to put curbs on set­tle­ment of trade deals

NEW DELHI: In­dia's strat­egy of strad­dling two boats on its re­la­tion­ship with Iran seems to be ty­ing it in knots. Un­der pres­sure from the US to act against Iran's nu­clear am­bi­tions, the govern­ment, which had got the Re­serve Bank of In­dia (RBI) to put curbs on set­tle­ment of trade deals with the West Asian coun­try, is now find­ing it­self in a sit­u­a­tion where it has to deal with pres­sure from lo­cal oil com­pa­nies as well as Ira­nian au­thor­i­ties.

Do­mes­tic oil com­pa­nies such as ONGC and IOC are find­ing it tough to im­port crude due to pay­ment set­tle­ment prob­lems. Their bankers such the State Bank of In­dia, Pun­jab Na­tional Bank and In­dian Over­seas Bank have no so­lu­tion in sight as they them­selves are try­ing to fig­ure out the new rules. Ira­nian crude ac­counted for 16% of the coun­try's oil im­ports in 2009 and was the sec­ond biggest con­trib­u­tor af­ter Saudi Ara­bia (18% of im­ports).

Last week, the RBI asked im­porters to set­tle their ac­counts out­side the Asian Cur­rency Union in cur­ren­cies other than dol­lar and euro, leav­ing oil com­pa­nies to pay for the crude only in ru­pees.

Be­sides, bankers and oil com­pa­nies said un­der the amended rules, In­dian banks have to set­tle the ac­count di­rectly in­stead of the Ira­nian cen­tral bank trans­act­ing with the RBI. The Ira­nian cen­tral bank has re­fused to deal with In­dian banks in­di­vid­u­ally, which could ex­pose it to de­fault risks.

With the prospects of oil sup­plies get­ting af­fected, fi­nance sec­re­tary Ashok Chawla on Tues­day met ex­ec­u­tives from sev­eral banks, oil com­pa­nies as well as of­fi­cials from the RBI and fi­nance min­istry but sources said the meet­ing failed to ar­rive at a so­lu­tion. While one op­tion was to en­ter into an ar­range­ment on the lines of the ru­pee-rou­ble trade with Rus­sia, with the value of the In­dian cur­rency linked to the Ira­nian rial, but Tehran in­sists that it can only be done if an in­ter-gov­ern­men­tal agree­ment is signed.

"That's a po­lit­i­cal call that the govern­ment has to take. But it looks dif­fi­cult given the pres­sure from the US and other coun­tries to curb trade and other ex­changes with Iran," said a source.

Be­fore the RBI cir­cu­lar was is­sued last week, the set­tle­ment be­tween Ira­nian and In­dian cen­tral bank was done in dol­lar. -PB News